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The Bank of Russia External and Public Relations Department informs that on 3 February 2012 the Board of Directors of the Bank of Russia decided to maintain the refinancing rate and the interest rates on the Bank of Russia operations unchanged (table “Interest rates on the Bank of Russia operations”).

The decision was supported by the assessment of inflation risks and risks of economic growth slowdown, including those associated with the global economic uncertainty.

In January 2012 inflation decelerated significantly: as of 30 January the pace of inflation declined to 4.1% over year ago (6.1% at the end of 2011), which was due to the planned deferment of an increase in the majority of regulated prices and tariffs until the middle of 2012. The Bank of Russia takes into account the temporality of this effect and relies on medium-term inflation forecasts in making monetary policy decisions. Meanwhile, the ruble appreciation observed in January may have some disinflationary effect.

The dynamics of the main macroeconomic indicators in December showed persistent firmness of consumption beside the moderate production growth figures. Further decrease in unemployment rate, high real income growth rate and the continued expansion in consumer credit contributed to the acceleration of retail sales growth. The growth rate of investment in production capacity increased in December. However, industrial production growth rate in year-over-year terms decreased sharply compared to November, which was partly explained by the decline in particular components of the index due to weather-related factors. Production growth rates and economic confidence indicators remained rather low in the recent months.

Considering recent domestic and international macroeconomic developments the Bank of Russia judged that the current level of money market interest rates within the interest rate corridor was appropriate to balance the inflation risks and the risks of economic growth slowdown in the coming months. The Bank of Russia will continue to monitor the effect of the tightening of monetary conditions resulting from the consequences of the transition to the liquidity shortage in the banking sector beside the deleveraging processes in the external financial markets.

The next meeting of the Board of Directors on monetary policy issues is planned to be held in the first half of March 2012.